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The WA State Budget 2018

The numbers that matter: State Budget 2018-19

Today, Treasurer Ben Wyatt delivered his much anticipated second Budget which will guide the State’s economic fortunes over the next 12 months and take the Government to the mid-term point.

The Budget sets out an improved outlook for the State, with a significant improvement in forecasts and some light at the end of the debt tunnel, with debt now peaking at $40.8 billion in 2020-21. A deficit remains forecast for the next two years with the first surplus in 2020-21 of $1.3 billion.

The Budget highlights the continued positive signs in the economy which will be welcomed on many fronts. There is better than expected overall revenue due to improved income from iron ore royalties, stamp duty and payroll tax. Mining revenues are up by $1.2 billion across the forecast period. The on-going cuts to government spending and the commitment of Commonwealth funding has further improved the forecasts.

Households will experience an average 6.3 % increase in utility charges and the foreign property buyers levy increases from 4% to 7%.

Our Government Relations team has examined the budget papers to bring you the key elements that matter and highlight the measures hiding in the details.

The Budget path to repair is based on a range of key assumptions and forecasts. Treasurer Ben Wyatt is relying on growing consumer confidence and increased volumes in iron ore to help drive a return to surplus.

Gross State Product is set to rebound to 2.5% in 2017-18 and increase to 3.25% 2018-19

Employment growth of 1.5%, down from 2.25% this year

Unemployment rate 5.75% in 2018-19, falling to 5.0% in 2020-21

Wage price index growth of 1.75% in 2018-19, up from 1.5% last year

Iron ore price of $US61.9/t, down slightly from last year $US68.3/t

Iron ore volumes 822mt, up from 813mt last year

Crude oil price $US66 per barrel in 2018-19, up from $US62.1 per barrel last year

State population growth 1.2%, up from 1.0% last year

CPI (Perth) 1.5% growth, up from 1% last year

In his Budget speech, Treasurer Ben Wyatt said that while the Government was not revisiting the policy to increase the royalty rate on gold in this budget, an increase was still “justifiable”. Gold miners have been warned!

The budget includes increases in fees for the wider resources sector through a range of initiatives.

The Building Construction and Training Fund levy is used to fund training and apprenticeships. In a move set to raise $25 million over four years, the levy will be extended to include the resources sector from 1 July 2018. The levy applies to all resources, residential, commercial and civil engineering projects valued at more than $20,000 at a rate of 0.2 per cent of the total costs of work.

The budget also includes $5.5 million to support the State’s bid to host the New Energy Industry Cooperative Research Centre headquarters. This centre will support industry-led research and promotion of emerging industries such as battery and energy technologies. The centre will focus on maximising opportunities from WA’s resource assets.

Annual mining tenement rents will increase by 6% in 2018-19 and again in 2019-20. This revenue will be used to fund the Exploration Incentive Scheme with a cost of $10 million per annum.

The budget also includes an initiative to improve the Department of Water and Regulation’s cost recovery model for environmental regulation. It is expected this will result in an additional $19.4 million collected in fees over the next four years. The agency will use revenue to fund measures to speed up approvals – employing more staff and improving online systems.

The primary industry and regional development budget has a focus on agribusiness, regional digital connectivity, energy futures, economic infrastructure and Aboriginal economic development.

The key commitment to the agriculture sector is an additional $24 million to build grains research and development capacity, bringing the total investment to $45 million across four years. A further $5 million is committed for the development of the Myalup Primary Industry Reserve which supports the Myalup-Wellington dam project. The Government has committed $5 million to develop digital farming and will commission a review to identify the most appropriate role for it in agriculture and food research, development and innovation.

The Budget also commits $4 billion of Royalties for Regions funding across regional Western Australia. This will enable the continuation of programs such as the country age pension fuel card, regional youth justice service and Kimberley schools program.

Some of the key regional commitments made in the Budget include:

$2 billion on regional roads, including $106 million for the Bunbury ring road (which complements the $560 million commitment in the Federal Budget)

$70 million for improvements to high risk regional roads across the State;

$73.3 million, over five years, for the Geraldton Health Campus stage 1 redevelopment;

$10.2 million to construct and operate a Mid-West community mental health Step Up/Step Down service

$80 million to enhance rural bushfire capacity across the State through the new Rural Fire Division

$22.5 million for the Regional Economic Development Grants Scheme to drive economic development; and

$10 million per annum from 2019-20 onwards to continue the Exploration Incentive Scheme.

The surcharge paid by foreign residents purchasing WA property will increase from 4% to 7% from January 2019. This compares to NSW (8%), Victoria and South Australia (7%) and Queensland (3%).

The increase is estimated to raise an additional $50 million over the period to 2021-22 – taking revenue from the surcharge for that year to $123 million. The surcharge was first introduced last year and applies to residential property only. The Government says the surcharge is a way to ensure foreign owners of residential property contribute to the cost of the services and infrastructure which they benefit from.

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WA households are being asked to carry some of the burden for budget repair, with the average household paying an additional $300 per year, following increases to power, water and vehicle registration.

A new pricing structure for water consumption will increase revenue and aims to put downward pressure on consumption. Consumption of the first 150kl will be charged at $1.78/kl, consumption up to 500kl will be charged at $2.37, and users consuming more than 500kl will pay $4.44/kl.

On top of previous rises, power prices are also going to increase by 7%, and motor vehicle licensing costs will increase by 3.8%.

METRONET leads this year’s transport announcements, with $3.6 billion in funding locked in to enable work to start in key areas. A railcar procurement program, with a 10-year horizon, will see $1.6 billion invested.

$3.2 billion in road infrastructure funding was announced, with $1.2 billion allocated to metropolitan roads, including 11 major metropolitan projects to alleviate congestion and improve safety. $2 billion has been allocated to regional roads, with 8 large projects announced, including $70 million to deliver upgrades on roads identified as high risk. $135 million has been allocated for cycling infrastructure, mainly focused on Principal Shared Paths (PSPs).

The Government has also allocated $15.3 million over the next four years to establish Infrastructure WA as an independent advisory body to provide advice to Government on infrastructure priorities.

The total education budget for 2018-19 is $5.09 billion, a modest increase up from $5.02 billion in 2017-18.

$468 million has been allocated for school construction and upgrades, including new primary schools in Baldivis, Banksia Grove, Byford and Caversham and new secondary schools in Butler and Baldivis.

Also included in the Budget is continued funding for additional education assistants, independent learning co-ordinators, regional learning specialists, and additional teachers to support mental health programs in schools.

TAFE campuses are being upgraded and repurposed state-wide and the Government will invest $17.9 million in the Esperance TAFE Campus, with a focus on trades training, nursing and aged care.

The freeze on course fees for vocational and education courses continues during the period to 2021.

Total health spend in 2018-19 is budgeted at $8.81 billion, down from $8.9 billion in 2017-18.

With the Sustainable Health Review report and recommendations due out in November this year, there were no big surprises in the health sphere. Even so, $55.9 million has been allocated to health technology projects, reflecting the increasing importance of technology in health care.

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